Tax implications of buying Intellectual Property Rights

[crawfonr]

Hi,

I have a friend who has spent many years doing academic research. The result of this research could be used to develop a web application. What I am proposing is either paying for the intellectual property rights to this research or paying for an exclusivity deal so that if they decide to commercialise their work I have the option to be the IT provider for this work.

So my question is what are the tax implications of this for my business. If say I spent 10k to secure this deal would it be entirely tax deductible?

Any advice much appreciated, thanks

Neil

[thunderlizard]

yes, don't see why not.

[Maslins]

Would it be a recurring fee (eg annual licence)? If so, yes, simply deduct it as an expense.

If it's a one off payment and you can use the IP forever, that's more likely to have long term value, so you could be into the realms of intangible fixed assets. Most likely treatment would then be to capitalise and impair over the useful economic life of the asset (which is quite possibly as long as a piece of string...ie up to you).

[crawfonr]

Excellent. Thanks for the replies. I guess its up to us to decide what arrangement we come to - would probably be a one off payment rather than a annual license.